The Never-Ending Stadium Boondoggle

You and I continue to foot alarge partof the bill for America’s billionaire sports owners.

As the 2015 NFL season kicks off and all the excitement that comes along with it, let us not forget that U.S. taxpayers are bearing a large part of the cost. In the past 15 years alone, over $12 billion of the public’s money has gone to privately owned stadiums—constituting essentially a massive transfer of wealth from everyday Americans to the super-rich owners and players involved in these billion-dollar sports franchises.

The Dallas Cowboys ushered in the era of the billion-dollar stadium when their current facility opened in 2009. Taxpayers assumed the cost for over a quarter ($325 million) of its $1.2 billion dollar price tag.

At the under-construction U.S. Bank Stadium, where the Minnesota Vikings will eventually play, public dollars account for roughly half the cost—an estimated $498 million—of the total $1.06 billion bill. Although Minneapolis initially required a public referendum to approve funding for the stadium, a “stadium authority” was able to override the referendum and authorize the budget without taxpayers’ consent.

The Atlanta Falcons’ new Mercedes-Benz Stadium—not to be confused with the Mercedes-Benz Superdome in New Orleans—is slated to open in 2017 at a projected cost of $1.5 billion, with the public picking up an estimated $600 million of its tab.

Even Buffalo, where the existing Bills stadium received $130 million in public funding last year for renovations, is considering building a new, $800 million to $1 billion NFL facility.

The decision to build or renovate stadiums is not one that cities make on their own. The NFL can and does apply pressure for stadiums to be upgraded if they’re not seen as up to par. In 2010, the league threatened to take Miami out of the running for future Super Bowls unless its stadium was substantially renovated after rain marred the 2007 edition of the game there. When lawmakers—reeling from the aftershock of a massive taxpayer subsidy for the Marlins baseball stadium—rebuffed efforts for public financing, the team’s ownership decided to undertake the $400 million-dollar-plus renovation, on its own dime.

Twenty other NFL stadiums have opened since 1997, at a cost of nearly $5 billion in taxpayer funds, according to one analysis. Judith Grant Long, a leading expert on sports stadium funding at the University of Michigan, estimates that taxpayers have actually spent as much as $10 billion more on professional sports stadiums and arenas than is typically acknowledged after various hidden costs are taken into account.

The threat of relocation

One tactic that is frequently employed to get the public to fork over money is to threaten to move a beloved team to a new city. The Baltimore Colts moved to Indianapolis in 1984, after Baltimore failed to accommodate the team’s demands for a new stadium. Owner Robert Irsay shopped the team to several cities, including Phoenix and Jacksonville, before settling on Indianapolis, which had a new stadium built and waiting for an NFL team.

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In 1996, Art Modell moved the Cleveland Browns to Baltimore, where they became the Baltimore Ravens and acquired a new $200 million stadium. (On the day after their move was announced, Cleveland residents voted decisively to remodel their own stadium.) After three years, the NFL created a new expansion team for Cleveland—the cost of which was yet another new stadium.

In 2014, the San Francisco 49ers moved from their historic home at Candlestick Park to the $1.3 billion Levi’s Stadium in Santa Clara after a protracted bidding war between the two cities. Santa Clara taxpayers ended up on the book for between $150 and $200 million in subsidies—an amount that exceeds the entire city’s annual budget of $140 million.

Currently, Los Angeles—which has no NFL team after losing the Rams to St. Louis and the Raiders back to Oakland in the mid-1990s—is chomping at the bit for a pro football franchise (a situation reflected in a key plotline of this season’s Ray Donovan). A plan is being floated around, modeled on the 49ers deal, to build a $1.7 billion stadium in Carson City that couldhost two teams at once—the Raiders and the San Diego Chargers.

This has, not surprisingly, generated counter proposals from both Oakland and San Diego, who are seeking to retain their teams. San Diego has proposed a $1.4 billion stadium adjacent to the existing Qualcomm Stadium, backed with as much as a billion in public subsides. Oakland has countered with a $900 million stadium to keep the Raiders in town as part of a much a larger $4.2 billion mixed-use development deal.

The threat of moving a team puts cities and their mayors on the proverbial hot seat: They can either ante up the dough or watch their fan’s beloved team go elsewhere. As Stanford University’s Roger Noll, a leading expert on sports economics, points out: “Cities have very little bargaining power with an NFL team. As long as there are cities without NFL teams that are willing to subsidize a stadium, cities will have to pay part of the cost of a new stadium.” What mayor or council wants to be on the hook for that? Supporting billionaire owners may look bad, but sitting idly while the local team moves to another city can also mean getting tossed out of office.

The stark reality is that cities and their leadership are mainly complicit in stadium boondoggles. Even when residents vote down these deals, they often frequently reappear under the guise of stadium development authorities and other non-democratic ways to obtain public funding. A comprehensive 2006 study of the local growth coalitions of business and politicians that foist stadium deals on taxpayers found that public officials are frequently active participants in stadium shakedowns—far from the neutral brokers they like to claim. The study concludes that “the default position of local governments (with only rare exceptions) is to believe in the wonders of publicly subsidized sports stadiums."

Subsidizing stadiums is an economic disaster

The overwhelming conclusion of decades of economic research on the subject is that using public funds to subsidize wealthy sports franchises makes zero economic sense and is a giant waste of taxpayer money. A widearray of studies have shown that professional teams add virtually no income to local economies. In fact, some of them find that large subsidies actually have a negative effect, taking money out of the local economy. Aside from the jobs generated by actually building the stadium, most jobs inside the stadium—selling food and beer or working at team concessions—are low-paying temp jobs. It’s even worse for football stadiums, which are used for games at most a dozen times a year, and maybe a few more times for concerts or large events. Public economic development dollars can be put to much better use on things besides subsidizing sports teams and their wealthy owners.

Ultimately, the burden of public subsides falls disproportionately on small cities that are the least able to bear the cost. For example, a $200 million public subsidy for a new stadium ends up costing a small city like Santa Clara roughly $1,650 per resident, compared to just $50 a person for L.A. And, of course, teams in bigger cities, with their bigger markets and more revenue, often do not need subsidies at all.

Stop the madness

It’s time put an end to runaway public subsidies to lucrative sports franchises. Is there any other industry or field of business where taxpayers are asked to hand over astronomical sums to billionaire owners and their millionaire employees?

If cities and states cannot stop themselves, it’s up to the federal government to step in. As Andrew Sharp put it recently at Grantland: “Isn’t this what the federal government is for? If there’s interstate commerce that wreaks havoc on state and local governments as a rule, shouldn’t Congress step in to legislate the business back to sanity?” I could not agree more. Sports economists suggest using federal antitrust laws to keep professional sports teams and leagues in line—something Congress has been reluctant to enforce. President Obama’s 2016 budget proposal called for a ban on using tax-exempt municipal bonds to fund stadiums, but in the current climate, Congress does not appear likely to act on it.

It’s high time to stop this madness once and for all.

About the Author

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate.